Netflix sees Q4 profit, adds 2m subs

Netflix shares have soared by more than 30 per cent after ithe company reported a strong increase in subscribers and beat forecasts with an unexpected profit in the fourth quarter.

The TV and movie streaming service company has endured a turbulent two years marred by a botched rebranding and a price rise. But its shares have stabilised in recent months, thanks in part to an exclusive output deal agreed with Walt Disney, which will give Netflix access to the company’s new movies from 2016.

Reed Hastings, Netflix’s chief executive, said that the Christmas period was “particularly strong, driven by consumers buying new electronic devices, including tablets and smart TVs”.

“We’re at the beginning of the expansion of internet TV,” Hastings told FT. “We’re helped by consumer electronics – smart TVs and tablets – which are getting better and better. We’re not beholden to growth [in consumer electronics] but we help each other… people buy smart TVs so they can watch Netflix.”

The company added 2 million new subscribers in the US in the fourth quarter, almost double the third quarter, and 1.8 million internationally in the final three months of 2012, giving it 33 million global subscribers.

Net income in the fourth quarter was $7.9 million, down from $35.2 million in the same quarter in 2011. Net income for the year fell to $17.2 million, down from $226 million, as the company invested heavily in international expansion, launching in new key markets such as the UK. Revenues rose from $3.2 billion to $3.6 billion.

Netflix has moved into original content production, hoping to entice viewers into “cutting the cord” and moving away from cable TV subscriptions. Next week it will debut its most expensive series to date – House of Cards, directed by David Fincher and starring Kevin Spacey. Hastings said the series launch, when all 13 episodes would be made available at once, would be “a defining moment in the development of Internet TV”.

Online viewing was a “better experience” for viewers, he added, “because of the freedom and flexibility it provides, and in the case of Netflix, the lack of commercials”.